Goodwill

24/05/2013

The simplest way to describe goodwill is as a company’s reputation. Say there were two supermarkets with the same market capitalisation, but one of them was more popular than the other, had more experienced management and was in a better location – that one would be seen as more valuable because of goodwill.

Goodwill is an intangible asset, but still appears on balance sheets. So if company X has assets of £2m, but is bought by company Y for £3m, the extra £1m is largely the goodwill – the price paid for company X’s reputation, trading connections, market positioning, profit-earning potential, and so on. It appears on company Y’s balance sheet as an intangible asset (along with patents and trademarks).

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.Find out which one is best for you.